OTTAWA - It was "unreasonable in all circumstances" for the federal government to appoint a third-party manager in response to an unfolding humanitarian crisis in the troubled First Nations community of Attawapiskat, the Federal Court ruled Wednesday.

But there was no political malice at play in the decision — on the part of either Prime Minister Stephen Harper or members of his cabinet — nor any intent to embarrass the northern Ontario reserve or its members, the court concluded.

Sending in Jacques Marion last November to take over the band's finances was the wrong way to address what was a critical housing shortage and worsening crisis on the northern Ontario reserve, the court said in its written ruling.

"The decision to appoint (Marion) did not respond in a reasonable way to the root of the problems at Attawapiskat nor to the remedies available," wrote Federal Court Judge Michael Phelan.

"The (government) invoked a financial management remedy without considering more reasonable, more responsive or less invasive remedies available."

The decision to appoint someone to take over the band's books was made without any indication that there was a problem with the way the band was being managed, Phelan pointed out. Indeed, it was Prime Minister Stephen Harper himself who pointed out in the House of Commons that the government had invested more than $90 million in the community, he continued.

"The reference by the prime minister as to the $90 million could not have related exclusively to the funds made available for housing repair or reconstruction," Phelan wrote.

"It would be inaccurate to suggest that officials were insensitive or uncaring about the situation at Attawapiskat.... The problem seems to have been a lack of understanding of the AFN’s actual needs and an intention on the part of officials to be seen to be doing something."

The Conservative government made it clear Wednesday it's unhappy with the ruling, but isn't yet ready to say whether an appeal is in the offing.

"We are disappointed with the court's decision and will review it to determine the appropriate next steps," said Jason MacDonald, a spokesman for Aboriginal Affairs Minister John Duncan.

The ruling verifies what many experts have already concluded, said constitutional lawyer and University of Ottawa professor Joseph Magnet: the relationship between the federal bureaucracy and some aboriginal communities is seriously flawed.

"It's just dysfunctional," Magnet said. "You can see it (in Attawapiskat) and you can see it elsewhere. Those relationships don't work."

New Democrat ethics critic Charlie Angus, whose riding includes Attawapiskat, said Duncan sat on his hands for a month while the housing crisis was unfolding, and then overreacted when it began making headlines.

When the crisis quickly became a black eye for the government, "in the midst of what became an international crisis, their response was to run roughshod over the law, attempt to remove a democratically elected band council, and break the law," Angus said.

"We really have to ask ourselves why is it that this combination of incompetence and ruthlessness was the only response of this government to deal with a community that was desperately poor and asking for help."

The court, which acknowledged the politically charged climate and intensive media attention at the time, took pains to point out that it found no evidence Ottawa was playing politics with the community when Marion was appointed.

"Those allegations were largely withdrawn, and to the extent that they linger, the court finds that there is no evidence that the prime minister or the cabinet engaged in such reprehensible conduct," the decision said.

"The problem in this case does not lie at the feet of the political masters but in the hands of the bureaucracy."

The James Bay community of 2,000 declared a state of emergency in October 2011 after a severe housing shortage forced more than two dozen families to live in temporary, mouldy shelters, some without insulation or plumbing.

The Conservative government appointed a third-party manager amid suggestions from Prime Minister Stephen Harper that the band had been mismanaging federal funds in the face of the housing crisis.

Marion was withdrawn in April, but the Attawapiskat First Nation persisted in its lawsuit against the government, anxious to get the courts to "refute'' Harper's suggestion that the band had been mismanaging federal money and to have Marion's appointment declared unlawful.

Harper's comments at the time show that the government sees aboriginal people as adversaries, said Liberal aboriginal affairs critic Carolyn Bennett.

"(The government) chose to smear the reputation of the band instead of owning up to its responsibility to respond to the housing emergency in Attawapiskat.”

When Marion was pulled, government officials insisted it was due to the fact the band had done a good job in improving the health and safety conditions that had required the outside control in the first place.

They said the 25 families affected by the housing crisis were now living in better conditions.

Magnet urged the government to follow up the ruling by launching a complete review of living conditions in Attawapiskat and shake things up in Aboriginal Affairs.

"If I were minister, I would be moving in and cleaning up house," he said. "You can't have that kind of a bureaucratic failure and say, 'OK, try to do better next time.'"